Credit Rating Agency

Credit Rating Agency

A company that provides investors with assessments of an investment'srisk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. A high rating indicates low risk and may therefore encourage investors to buy a security. Additionally, banks may only invest in securities with a high rating from two or more credit rating agencies. The SEC recognizes 10 firms as credit rating agencies; Fitch, S&P, and Moody's are the three most prominent. However, the methods of credit ratings agencies have been subject to criticism. For example, most agencies gave high-riskmortgage-backed securities top ratings until they defaulted at the collapse of the housing bubble.

Under CRARA, a credit rating agency seeking to be treated as an NRSRO must apply for and be granted registration with the Commission and make public in its application certain information to help people assess its credibility.

The credit rating agency said Goldman has been Wall Street's profit leader for several years and has very strong liquidity, but that its emphasis on trading and "aggressive" risk appetite expose it to potential for "major missteps."

Moody's Investors Service, international credit rating agency, raised Korea's sovereign credit rating on July 25 by one notch from 'A3' to 'A2,' the sixth-highest level, after reviewing the improvement in the country's overall economic performance and eased geopolitical risks.

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